Successful health care reform requires bold changes, not more of the status quo. Nowhere is this truer than in the case of Medicaid, the federal-state partnership to provide health care to the poor and disabled. Unfortunately for taxpayers and program beneficiaries, this was neglected by Obamacare. The new law leaves failing policies in place while expanding the program to cover more than 20 million new individuals. This will only exacerbate existing problems.
Despite the bad policies that are now law under Obamacare, some in Washington continue to recognize that Medicaid is in crisis mode, pushing for reform to reduce the program’s burden on taxpayers while improving its quality. Last week, Senators Tom Coburn, M.D. (R–OK), Richard Burr (R–NC), and Saxby Chambliss (R–GA) introduced legislation to give states flexibility to fix Medicaid.
Medicaid is on an unsustainable path and promises to consume a growing portion of state budgets and increase deficit spending. In response, state legislators have begun to aggressively seek ways to reduce the program’s cost while also improving it. But due to federal mandates and bureaucratic barriers to change, this is easier said than done. Both the stimulus and Obamacare enacted maintenance-of-effort (MOE) requirements that restrict states from altering Medicaid eligibility. Moreover, states must apply for waivers from the Department of Health and Human Services (HHS) to make significant changes to the programs—a lengthy and often unsuccessful endeavor.
States are thus left with few tools to reduce spending: They can reduce provider reimbursements, reduce benefits covered under the program, or raise taxes. Medicaid payment rates for physicians are already about 58 percent of private insurance rates, severely reducing access to primary care physicians and specialists. The result is a low-quality program where beneficiaries are even more dependent on emergency room care than the uninsured. In sum, Medicaid has become an expensive and poorly performing program, yet states have their hands tied and cannot address the causes.
The Coburn–Burr–Chambliss proposal would give states a capped allotment to provide coverage for specific members of the Medicaid population: pregnant women, low-income children and families, and the long-term care services received by low-income elderly and disabled. Funding would be based on the number of residents living in poverty and would grow with increases in costs and population. This system would be more equitable than the existing one and would remove incentives for states to grow their programs to unaffordable levels simply to obtain more federal funding. No changes would be made to funding for acute care to low-income elderly and disabled Americans. Finally, the proposed legislation would do away with the restrictive MOE requirements and repeal Obamacare.
In our own reform proposal, The Heritage Foundation suggests going even further. We also start by repealing Obamacare. Then, we move moms and kids currently dependent on the failing Medicaid program out of Medicaid and provide them with financial assistance to buy the same private health insurance as other Americans. We then refocus Medicaid to cover the low-income elderly and disabled—creating a true safety net program—while providing states with a capped federal allotment to experiment with better ways to meet the needs of Medicaid’s most vulnerable population without unnecessary, burdensome federal obstacles.
This approach would focus Medicaid on those individuals for whom a safety net is needed, move working families into private health insurance, and alleviate the unsustainable burden on state and federal taxpayers to fund a failing Medicaid program.